Sustainable spice trade The Tanzania case Mini conference Spices in Africa: new opportunities on an old continent Royal Tropical Institute 2 December 2009 By Marije Boomsma
Contents 1. Study background: why a sustainability scan? 2. Economic sustainability 3. Social sustainability 4. Ecological sustainability 5. SWOT 6. Recommendations 7. Discussion
1. Study background Context Increasing domestic demand in Asia and demand for diversification of sources in the industry. Tanzania was selected as business case to learn about local opportunities and challenges for developing a stable and sustainable spice source in Africa. Methodology Primary and secondary research (By Hebron Mwakalinga) Desk research: surveys and market data Focus group discussion with farmers (Tanga) Interviews with traders, certifier, government agencies, NGOs
2. Economic sustainability 1. Production figures 2. Market trends 3. Quality management 4. Competitiveness
2.1 Production and supply High diversity of crops but productivity is low (20%) Spice production: 12.000 mt or 5% of LDC export Spice export USD 11.2 million or 0.6% of total export 18 Exporters of which 3 exporters 95% (mainly cloves, pepper, vanilla) Third largest African exporter (next to Comores and Madagascar)
Cloves Cinnamon Pepper Ginger Paprika Black pepper Cardamom
Figure No.5 The Tanzania Spice Supply Chain Imports of processed spices Source: Akyoo and Lazaro, 2007. (With minor adaptation on imports)
Figure No.2 Tanzania Spice Export Basket in 2008 by Percent of Export Value and Metric tones Source: TRA Customs Department
2.2 Market trends Volatile market but growing global demand (8.5%) 18 Exporters of which 3 exporters 95% (mainly cloves, pepper, vanilla) Diverse markets: EU/US, far East, regional markets Largest markets: India (30%), Singapore (24%) and Saudi Arabia (21%) EU market: 4.6% (mostly vanilla and pepper) (without cloves the EU market is 56%) EU market 2% growth per year Destination Country Spain Germany Netherlands Belgium United Kingdom Sub-total EU India Singapore United Arab Emirates Kenya Pakistan Japan United States Sub-total other major importers Value in USD 241,911 250,330 66,171 68,831 17,791 645,034 5,199,035 4,030,262 3,383,839 99,428 88,822 163,859 82,672 13,047,916 Percent 1.74% 1.80% 0.48% 0.50% 0.13% 4.6% 37.46% 29.04% 24.38% 0.72% 0.64% 1.18% 0.60% 94.01% Minor importers 185,810 1.34% Total 13,878,760 100.00%
Figure No. 4. Trend of EU Imports of Spices from Tanzania in Quantities (20001 2005)
2.3 Quality management In general low quality: 50% of production is therefore sold locally Traders/exporters apply ISO, ASTA standards, HACCP, Global Gap and GMP No chemicals used (pest, herbi, fungi-cides) and no heavy metals In general lack of local knowledge on quality Local standards for black, white pepper, chilies and capsicums, cardamom, curry, ginger, cloves and turmeric through Tanzania Bureau of Standards Inefficient local labs (public and private authorities) Quality is being improved through increased organic certified production 1 local organic certifier: TanCert
2.4 Competitiveness High diversity of spices Organic production + certifier Support for capsicum production and Zanzibar spices Yet Low quality products and lack of knowledge on quality management Small Scale High labor costs as compared to Asia (spice production is labor intensive) Local labs not sufficiently equipped Little governmental support in the mainland (except capsicum)
3. Social sustainability 1. Livelihoods 2. Empowerment 3. Equality/non discrimination Note: No information on labor conditions nor child labor
3.1 Livelihoods of farmers Small scale farmers: 64% less than 2 ha. Farmers produce multiple crops e.g. cassava, banana, maize Spices are cash crop and no threat for food safety Intercropping systems (citrus, coconut, banana) Land competition in high lands (not in lowlands: ginger, paprika, turmeric) Black pepper cultivation: average 0.58 ha per farmer Added value black pepper hh: turnover USD 373 and costs USD 280 (mostly labor costs) Side selling: cause no incentives for (organic) contract farming
Table No. 3. A comparison of prices between organic and conventional at different stages Crop Producer Price Paid by Organic farmers Tshs Convent. farmers Tshs Premium in percent Chilli Conventional company for dried produce 1,950.00 1,986.67 (1.85) Black pepper Village traders for fresh produce 225.00 229.41 (1.92) Black pepper Village traders for dry produce 1,268.75 1,104.76 14.84 Chilli Village traders for dry produce 1,500.00 - - Black pepper Distant traders for fresh produce 366.66 221.53 65.51* Black pepper Distant traders for dried produce 1,207.69 1,154.84 4.58 Chilli Distant traders for dried produce 1,912.50 1,972.73 (3.05) Black pepper Organic company for dried produce 1,190.48 1,225.00 (2.82) Chilli Organic company for dried produce 2,000.00 2,000.00 - Black pepper Organic company for fresh produce 248.00 233.33 6.29
3.2 Empowerment No integrated supply chains Supply chains instead of value chains Lack of market information and technical information (e.g. quality management) at the upper end of the supply chain Not many producer/farm organizations Farmers hardly involved in decision making Lack of credits and other services (seeds and training) Companies provide services, but problems with side selling Development organizations (Cordaid, USAID) have started to support setting up farmer groups
3.3 Equality Involvement of women in production is only 20% but is growing Women do not own land and therefore have little decision making power in what to grow Women prioritize food safety and men growing cash crops (=spices) Majority of workers in processing (sorting, packaging) are women
4. Ecological sustainability 1. Waste: chemicals use 2. Water protection and management 3. Natural resources and biodiversity 4. Energy use 5. Land: soil conservation
1. Waste: little waste Spices organic by-default cause no access to chemicals Little diseases 2. Water : not a critical factor Managed by National Water Policy waterbodies Mostly rain-fed production Sufficient access to fresh water sources No water born diseases mentioned 3. Biodiversity Intercropping cause high risks in mono culture. Agri forestry systems beneficial for spice production Farmers in organic chains trained in good farming practices 4. Energy Farmers level only sun drying Processing: one company uses wood fired dryer. Aims at more dryers to reduce transportation.
5. Land: degradation in high lands, less in low land (21%) Population growth high land: 72% of the poor land shortage Generally little land degradation in spice areas: cloves, black pepper and cinnamon positive for soil conditions Generally little soil conservation techniques in Tanzania Table No. 5. Main method used in protecting soil Contour Grass Strips Trash Lines Cover Crops Mulching Terraces Fanya Juu Avoi d Fire Total Better Off 26 22 4 4 9 9 4 22 100 Less Poor 24 14 17 14 3 17 0 10 100 Poor 14 0 0 14 0 43 0 29 100 Average 22 12 7 11 4 23 1 20 100 Source: BCS, Household Economy Survey for Nguru South Eastern Arc Mountains
5. SWOT Strengths Diversity of spices: less risks for farmers Paprika, vanilla, ginger and turmeric production growth in low lands Availability of 18 traders Growth in organic production Organic certifier + testing units available Special aroma for Zanzibar spices: strong brand name Government support in Zanzibar and capsicum sector Weaknesses Fractured supply chain, side selling, quality management, access to information and services Sector dominated by cloves (67%) : other crops small scale Shortage of land in high land areas (where cinnamon, pepper is produced) Position of women in production No value added activities (e.g. because in EU entry barriers!) No benefits for farmers/traders to sell to EU Little support from government
Opportunities Increasing productivity per ha and expanding land use for spices EU market (non cloves) Global market growth (8.5%) and growing domestic consumption in Asia NGO supporting programs: USAID, Cordaid, DAI PESA, TRI Linking up with governmental support organizations New policies for agriculture sector development Threats Compliance with health and safety standards (both producers, traders and testing units) Competition (artificial vanilla) Economic shocks
6. Recommendations Setting up integrated value chains of suppliers and (EU) buyers with local support from NGOs and banks Improving/setting up farmer organizations/trade houses to increase scale and prevent from side selling + to access services (e.g. finance) Strengthening capacity of farmers to increase productivity and improve quality management Setting up a spice sector platform for producers /traders/support organizations Promoting policy development: a national policy for spice export promotion Investing in infrastructure: labs
7. Discussion Discussion about. Main obstacles for diversifying markets in Africa? Minimum requirements for developing integrated supply chains in Africa? What support is needed? Diversifying in which markets? Is Africa an option?
KIT involvement in 2010 General services Facilitation of value chain development in the South Assisting of European companies in sustainable procurement Investing in sustainable business ventures in the South Generation of knowledge on farming systems, diversity, smallholder systems, services to farmers, agronomic knowledge Spice activities 2010 Participation through Annona sustainable investment fund in Elephant Pepper in Mozambique (chilies Colombia and Kenya in the pipeline) KIT 100 year: Spice conference (October 2010) Potential involvement in sustainable spice development IDH project